Walker, Lockhart, and Saving Testify before Committee on Aging

August 5, 2003

On July 29, the Senate Special Committee on Aging heard official testimony by David Walker, U.S. comptroller general; James Lockhart, deputy commissioner for the Social Security Administration; and Dr. Thomas Saving, a Social Security trustee. Those hearings provided a definitive statement: absent Social Security reform, future workers and future retirees will pay.

At the hearing, Walker presented the latest GAO report, "Social Security Reform: Analysis of a Trust Fund Exhaustion Scenario," and urged Congressional action on reform. In a prepared summary, Walker states: "Social Security reform is part of a broader fiscal and economic challenge. … Absent reform, the nation will ultimately have to choose between persistent, escalating federal deficits, significant tax increases, and/or dramatic budget cuts.

"Acting sooner rather than later would help to ease the difficulty of change. … Waiting until Social Security faces an immediate solvency crisis will limit the scope of feasible solutions and could reduce the options to only those choices that are the most difficult. [Acting soon] would also help to assure that the 'miracle of compounding' works for us rather than against us. Finally, acting soon reduces the likelihood that the Congress will have to choose between imposing severe benefit cuts and unfairly burdening future generations with the program's rising costs."

Lockhart testified: "At the point of trust fund exhaustion, in 2042, tax income would cover only 73 percent of scheduled benefits, which means a 27 percent across the board reduction in benefits. Younger workers would be particularly hurt in a trust fund exhaustion scenario…. As the Trustees said in their Annual Report, 'the sooner adjustments are made, the smaller and less abrupt they will have to be.'"

Saving, a senior fellow at the National Center for Policy Analysis and director of the Private Enterprise Research Center at Texas A&M, noted that the funding drain on Social Security will begin soon and accelerate rapidly:

"The fact that the Trustees' 2003 estimate of the Trust Fund exhaustion date is 2042 has no bearing on the demands that Social Security and Medicare will place on the rest of the budget beginning in just a few years. … Beginning in 2008 and in all subsequent years, these programs will become a drag on the federal budget.

"This year, Social Security will contribute to the Treasury the equivalent of 6.5 percent of total federal income tax receipts. This transfer will [reverse] and grow rapidly so that by 2042, the year the Trustees forecast that the Social Security Trust Fund will be exhausted, it will reach 15.5 percent of all federal income tax revenues.

"Thus, the Trust Fund and its exhaustion date play no role whatsoever in the amount of resources that must be transferred to Social Security beneficiaries if the current program remains in place. At best, the Trust Fund is simply a commitment by Congress to find the money and not a source of any funding. At worst, it may provide solace for some and delay changes necessary to address the coming shortfalls in Social Security funding."

Brad Smith, a student president and cofounder of Social Good through Politics at Harvard University, testified alongside Lockhart, Savings, and Walker, and implored the members of the special committee to commit to reform. As the leader of a Harvard group studying Social Security solutions, Smith said, "[Absent reform,] my generation will receive less in benefits than we paid in taxes, never mind seeing a return on our investment."

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